Spain is planning to borrow € 27 billion as advance against future grants which European Union (E.U.) will handover to member nations to fight the economic impacts of Coronavirus (COVID-19).
The total worth of the E.U.’s pandemic fund is € 750 billion. Spain is expecting € 70 billion of grants and € 70 billion in loans over the fund’s 2021-26 lifetime.
Spain wants to get the advance much before the official disbursement starts. The funds will be used to achieve the 2021 budget goals and revive the stalled economy. It is to be noted that Spain has a total of 10,46,132 cases and there have been 34,752 casualties. Spain is Europe’s worst affected country by COVID-19.
Speaking on the occasion, the Minister of Foreign Affairs European Union & Cooperation of Spain – Arancha González said, “We are now in the second wave of this pandemic and we need to counter it with a clear sense of the EU working to ensure the recovery happens as soon as possible.”
However, the analysts have raised concerns over Spanish Prime Minister – Pedro Sánchez’s ability of managing the E.U.’s pandemic fund. Sanchez has not been unable to pass a Budget ever since he came to power in 2018. He is looking to pass a Budget once he gets the E.U.’s pandemic fund as it would help him secure his office for the remaining 3 years of his tenure.
The Head of Economic Analysis at Banco Bilbao Vizcaya Argentaria (BBVA), a Spanish financial company – Rafael Doménech said, “The real key of the recovery plan is not the total amount but our ability to choose the right kind of projects. It is not going to be much help if we get € 140 billion and then show ourselves incapable of spending it well.”
As per the International Monetary Fund’s (IMF’s) estimates, the Spanish economy is expected to 12.8% this year. It has also predicted budget deficit rise to 14.1% of GDP.
There are speculations that Spain’s plans to allocate large proportion of the funds ahead of authorisation would be keenly watched by Northern European Governments. The member states have to submit their plans by April 2021 to E.U. The European Commission will then have a further 2 months to assess them. This will then be verified by E.U. Finance Ministers, which is again going to take another month.
Sánchez’s Government has already set out the 30 areas where it will invest the advance grant. The major part will be invested in education and training, modernisation of business and the health system, rural development and infrastructure. Reforms in areas like employee’s pension, digitalisation of the judicial system and investing as seed capital private sector are also on the cards.
Sanchez has also summoned the leaders of Spain’s 17 regions to discuss their plans for the recovery fund. He is also set to speak to the President of E.U. Commission – Ursula von der Leyen in the same regard. Sanchez has also refused forming an agency to administer the resources. He is set to retain tight control.
